1. What is Safety Stock?

Safety stock is the additional inventory held to mitigate the risk of stockouts caused by variability in demand and supply lead times. It acts as a buffer against uncertainty in supply chains.

2. How Does the Calculator Work?

The calculator uses the statistical safety stock formula:

Where:

• \( Z \) — Z-score corresponding to desired service level (unitless)
• \( \sigma_d \) — Standard deviation of demand (units)
• \( LT \) — Lead time (days)

Explanation: The formula accounts for demand variability and lead time variability to determine the appropriate buffer stock.

3. Importance of Safety Stock Calculation

Details: Proper safety stock calculation helps balance inventory costs against the risk of stockouts, improving customer service levels while minimizing excess inventory.

4. Using the Calculator

Tips:

• Z-scores: 1.28 ≈ 90% service level, 1.65 ≈ 95%, 2.33 ≈ 99%
• Standard deviation should be calculated from historical demand data
• Lead time should be in consistent units (days recommended)

5. Frequently Asked Questions (FAQ)

Q1: How do I determine the right service level?
A: Service level depends on product criticality - higher for essential items. Typical range is 90-99%.

Q2: What if lead time is variable?
A: For variable lead times, use: \( \sqrt{LT \times \sigma_d^2 + \text{Average Demand}^2 \times \sigma_{LT}^2} \)

Q3: How often should safety stock be recalculated?
A: Review quarterly or when demand patterns or supply lead times change significantly.

Q4: What are common z-score values?
A: Common z-scores: 1.28 (90%), 1.65 (95%), 2.33 (99%), 3.09 (99.9%)

Q5: How does this differ from reorder point?
A: Reorder point = (Average Demand × Lead Time) + Safety Stock